Equity Shares Rights Issue Resolution Template

About this agreement

Title: Resolution for Issue of Equity Shares at a Premium to be Offered to Existing Shareholders on Rights Basis and to Employees of the Company Format

Are you a company director seeking a professional Resolution for Issue of Equity Shares at a Premium to be Offered to Existing Shareholders on Rights Basis and to Employees of the Company Format in India? This essential board resolution template ensures compliance with the Companies Act, 2013, particularly Sections 62(1)(a) and 62(1)(b), allowing your company to raise capital efficiently by offering equity shares at a premium to loyal shareholders and dedicated employees.

Why is this Resolution Important?

In the dynamic Indian corporate landscape, issuing equity shares on a rights basis empowers companies to infuse fresh capital without diluting control excessively. A Resolution for Issue of Equity Shares at Premium Format formalizes the board's approval for such issuances, safeguarding against regulatory scrutiny from the Ministry of Corporate Affairs (MCA). It's crucial for startups, SMEs, and established firms aiming to reward shareholders' loyalty and incentivize employees through preferential allotments. Non-compliance can lead to penalties, delays in filings, or invalidation of the issue, making this ready-to-use legal template indispensable for seamless e-filing with ROC.

Key Benefits and Legal Requirements

This customizable equity shares issue resolution sample offers:

Regulatory Compliance: Adheres to SEBI guidelines (if listed) and Companies Act provisions for rights issues and employee stock options.
Flexibility: Specify premium amount, number of shares, offer timeline, and acceptance period.
Cost-Effective Capital Raise: Premium pricing maximizes funds without external investors.
Employee Motivation: Boosts retention by offering shares to staff on preferential terms.

Under Section 62, rights offers must be proportional to existing holdings, with a minimum 15-day acceptance window, ensuring fairness and transparency.

Key Elements of the Resolution Format

Our Resolution for Issue of Equity Shares at a Premium Format includes:

Preamble/Recitals: Company details, authorized share capital, and rationale for the issue.
Approval Clause: Board resolution approving the offer of [X] equity shares at a premium of INR [Y] per share.
Rights Basis Terms: Pro-rata offer to shareholders with record date and entitlement ratio.
Employee Offer: Details on shares for employees under Section 62(1)(b), including eligibility criteria.
Pricing and Payment: Determination of premium via valuation report (DCG/merchant banker).
Timeline and Procedures: Offer letter format, renunciation rights, and allotment committee.
Filing Directives: Authorization for Form PAS-3 and other ROC filings.
Closing: Director signatures and date.

Who Should Use This Format?

Ideal for:

Private and public companies in India expanding operations.
Boards approving rights issues to fund growth, R&D, or debt repayment.
Firms with ESOP schemes or employee incentive programs.
Startups scaling up via internal funding rounds. Common in business expansions, mergers prep, or during economic upturns.

Download Your Customizable Template Now!

Get instant access to our free downloadable Resolution for Issue of Equity Shares at Premium Format in PDF and Word formats. Fully editable and ready-to-use, it's tailored for Indian companies. Customize it to fit your specifics and file confidently.

Important Note

While this legal template for equity shares resolution is professionally drafted, it's recommended to consult a company secretary or legal expert for personalization. Not legal advice—ensure board quorum and minutes compliance. Explore related formats like 'Board Resolution for Share Allotment' or 'Rights Issue Offer Letter Sample' for comprehensive corporate governance solutions in India.

RESOLUTION FOR ISSUE OF EQUITY SHARES AT A PREMIUM TO BE OFFERED TO EXISTING SHAREHOLDERS ON RIGHTS BASIS AND TO EMPLOYEES OF THE COMPANY

RESOLUTION FOR ISSUE OF EQUITY SHARES AT A PREMIUM TO BE OFFERED TO EXISTING SHAREHOLDERS ON RIGHTS BASIS AND TO EMPLOYEES OF THE COMPANY

RESOLVED that subject to such consents, approvals and sanctions as may be necessary and subject to such conditions and modifications as may be required by any of them and accepted by the Board of Directors ("Board") of the Company for which purpose the Board is hereby authorised, the Board be and is hereby authorised pursuant to section 81 (1 A) of the Companies Act, 1956 ("The Act") to make a further issue of capital by offering???.further equity shares of Rs. 10 each in the company from out of the unissued authorised capital of the Company at a premium of Rs per share as

under:

(1) equity shares to be offered to the persons who will be the holders of the existing equity shares of the company and whose names will appear on the register of members of the company on such date as the Board may hereafter fix for the purpose, in the proportion of one new equity share for every five existing equity shares held by them; and

(2) equity shares to be offered to the permanent employees (including workers) of the company on the rolls of the company on such date as the Board may hereafter fix, and the Indian working directors of the company, on an equitable basis.

RESOLVED FURTHER that the aforesaid issue of new equity shares shall be subject to the following principal terms and conditions:

1. The said new equity shares shall be offered for subscription for cash, at a premium of Rs ???. per share.

2. The total sum of Rs???.(Rs???. on capital account and Rs???.on premium account) per share, shall be paid with the acceptance of the offer of such shares.

3. No coupons for fractional rights shall be issued in respect of holdings less than five existing equity shares or holdings of such shares in excess of multiple of five. Such coupons for fractions rights to the new shares shall be consolidated and the number of new equity shares of Rs. 10 each representing such consolidated fractional rights, shall be sold or caused to be sold by the directors at the best available market price as they may think fit and the net proceeds of such sale, if any, (after deducting expenses for such sale) will be distributed pro rata amongst the members of the company who would otherwise have been entitled to a fraction of such further shares.

4. The said???.new equity shares shall from the date of their allotment, rank pari passu in all respects with the then existing fully paid equity shares of the company but shall be entitled to the dividend which will be declared in respect of the financial year in which they are allotted pro rata, from the date of allotment.

5. "The members holding existing equity shares shall have the right to apply for additional shares in excess of the equity shares offered to them. The allotment of such additional shares shall be only out of those equity shares offered but not taken up and shall be at the full discretion of the directors.

6, The members aforesaid shall have the option to renounce their right to such further equity shares either in whole or in part, provided that if they so renounce their right, they will not be entitled to apply for additional shares.

7. The allotment of such further equity shares to persons in whose favour the rights rnay have been renounced as aforesaid, who are not existing equity shareholders, shall be in the absolute discretion of the directors.

8, The said offer to the members of the company, shall be made by means of a Notice to each member specifying inter alia, the number of further equity shares to which such member is entitled and intimating that the said offer will have to be accepted before expiry of the date as specified in the Notice.

9. The shares to be offered to the employees as stated above shall be subject to the further conditions contained in the Employees' Stock Option Scheme and the Scheme for granting loans to employees to be formulated by the directors of the company.

10. If the offer is not so accepted by the member on or before the stipulated date, it would be deemed to have been declined and the shares not taken up together with the shares left over would be disposed off in such manner as the Directors think most beneficial to the company.

11. The new equity shares shall be subject to the memorandum and articles of association of the company,

12. The amount paid on application in respect of further equity shares applied for but not allotted shall be refunded within the period to be specified in the Notice.

13. No allotment letters will be issued and that the certificates in respect of the new equity shares shall be delivered within 3 months frorn the date of allotment.

14. The issue and allotment of such further equity shares to members who are nonresidents will be subject to the approval of Reserve Bank of India under the Foreign Exchange Management Act, 1999.

15. The application for listing of such further equity shares will be made to the Stock Exchanges at..........., ???.and ???.in due course.

RESOLVED FURTHER that the board of directors of the company or such of them as may be authorised by the Board be and is/are hereby authorised, in its/their discretion to accept such conditions and modifications as.may be required by SEBI or any other authorities while according their sanction or consent to the proposed issue of the said equity shares including variation, if any, in the proposed amount of premium per share and to take such consequential action therein including the authority to revise/adjust the value/quantum of equity shares or any portion thereof in such manner and on basis, terms and conditions as may be considered necessary or expedient.

RESOLVED FURTHER that for the purpose of giving effect to the foregoing Resolutions, the board of directors of the company or such of them as the Board may empower for the purpose, be and is/are hereby authorised, inter alia, from time to time, to settle and finalise the form of letter of offer, application form(s) or any other documents containing such terms and conditions as the Board may decide in respect of the new equity shares, to appoint consultants, advisers, managers, registrars, bankers and/or brokers to the issue and pay their fees, remuneration, charges and/or brokerage as may be lawful for the purpose and to give such other directions and/or instructions as it/they may, from time to time, think fit or proper and to execute all such documents, papers and writings as may be necessary and to take all such actions and to do all such acts, deeds, matters or things whatsoever including directions for settling any questions, doubts or difficulties that may arise in regard to or in relation to the aforesaid offer and/or the issue and allotment of the said rights shares as the board or the directors of the company authorised by the board for the purpose or any of them in their/his absolute discretion may consider necessary, expedient, usual or proper in or about the premises.

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Important Guidelines

Guidelines for Drafting Resolution for Issue of Equity Shares at a Premium on Rights Basis:

This resolution is typically drafted during board or shareholder meetings to authorize the issuance of equity shares at a premium to existing shareholders on rights basis and to employees of the company. Here are guidelines to ensure clarity and avoid common mistakes:

Key Points to Include:

Clear Authorization: Explicitly authorize the issuance of equity shares at a premium to existing shareholders and employees. Premium Amount: Specify the premium amount at which the shares will be offered. Rights Basis: Clearly outline the rights basis for existing shareholders to subscribe to the shares. Employee Allocation: If applicable, detail the allocation process for shares to employees. Conditions: Include any conditions or restrictions associated with the issuance.

Common Mistakes to Avoid:

Vague Language: Use clear and unambiguous language to avoid misinterpretation. Incorrect Premium: Ensure the premium is set appropriately based on market conditions and regulatory requirements. Failure to Specify Rights: Clearly specify the rights and entitlements of existing shareholders in the resolution. Oversight of Regulatory Compliance: Ensure compliance with relevant securities laws and regulations. Neglecting Employee Allocation Process: If employees are included, clearly outline the process for their participation. This resolution is vital for transparently authorizing the issuance of equity shares and involves existing shareholders and employees in the company's growth. Consult legal professionals to ensure compliance with applicable laws and customize the resolution according to the company's specific circumstances. Regularly update records and adhere to corporate governance standards.

Frequently asked questions

What is the purpose of the Resolution for Issue of Equity Shares at a Premium on Rights Basis to Shareholders and Employees?→

This board resolution authorizes a company in India to issue equity shares at a premium to existing shareholders on a rights basis and to employees, as per Section 62 of the Companies Act, 2013, enabling capital raising while prioritizing current stakeholders.

Is this resolution legally valid for use in India?→

Yes, it complies with the Companies Act, 2013, and relevant SEBI guidelines for listed companies, making it legally enforceable when passed by the board of directors in India.

Does this resolution require stamp duty in India?→

Board resolutions like this typically do not require stamp duty in most Indian states, but verify with local stamp laws; it's best to execute on non-judicial stamp paper if specified.

Can I download and customize this resolution in Word or PDF format?→

Yes, download in editable Word or PDF format; customize details like share price, number of shares, and timelines while ensuring compliance with Indian legal requirements.

Who should use this Resolution for Issue of Equity Shares at Premium?→

Indian companies, both private and public, looking to raise funds by offering equity shares at premium to existing shareholders on rights basis and to employees under preferential allotment.

What are the next steps after passing this board resolution in India?→

File e-Form PAS-3 with the Registrar of Companies (ROC) within 30 days, issue offer letters, and comply with FEMA and SEBI regulations if applicable for foreign investments.